BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2389|
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THIRD READING
Bill No: AB 2389
Author: Gaines (R)
Amended: 8/2/10 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 5-1, 6/23/10
AYES: Alquist, Aanestad, Leno, Negrete McLeod, Pavley
NOES: Cedillo
NO VOTE RECORDED: Strickland, Cox, Romero
ASSEMBLY FLOOR : 61-0, 5/28/10 - See last page for vote
SUBJECT : Health care coverage: provider contracts
SOURCE : Aetna
DIGEST : This bill prohibits a contract by, or on behalf
of, a licensed health care facility, as defined, and a
health care service plan (health plan) or health insurer
from containing a provision that restricts the ability of
the health plan or insurer to furnish information to
enrollees and insured on the cost range of procedures, or
quality of services, performed by the facility, as
specified, and provides an appeals process for quality of
care data, as specified.
ANALYSIS : Existing law:
1.Provides for the regulation of health plans and insurers
by the Department of Managed Health Care and the
CONTINUED
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California Department of Insurance, respectively.
2.Requires hospitals to make a written or electronic copy
of its charge description master (a list of prices for
services) available, either by posting an electronic copy
on the hospital's website, or by making a written or
electronic copy available at the hospital.
3.Requires hospitals to submit their average charges for 25
common outpatient procedures, as specified, annually to
the Office of Statewide Health Planning and Development
who is required to publish this information on its
website.
4.Requires the Office of Statewide Health Planning and
Development to publish and update on its website, a list
of the 25 inpatient procedures most commonly performed in
California hospitals, along with each hospital's average
charges for those procedures.
This bill:
1. Prohibits a contract issued, amended, renewed, or
delivered on or after January 1, 2011, by or on behalf
of a health plan or insurer and a licensed health care
facility, that provide inpatient hospital services or
ambulatory care services, from containing a provision
that restricts the ability of the plan or insurer to
furnish information to subscribers or enrollees
concerning the cost range of procedures, or the quality
of services, performed by facility.
2. Requires that information on the cost range of
procedures, as specified, be displayed as an episode of
care, unless an episode of care is not applicable.
3. Prohibits a health plan from disclosing negotiated
capitation rates or other prepaid arrangements in the
information furnished to enrollees or subscribers.
4. Clarifies the process by which a facility may review how
data is compiled, reviewed and proved to health plan
enrollees and providers.
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5. Specifies that, if a health plan includes the allocated
capitation payment for an episode of care in the cost
information provided to subscribers and enrollees, the
plan and the facility shall consult on an appropriate
and reasonable methodology for doing so.
6. Requires a health plan or insurer, which provides
subscribers and enrollees with quality measurements of
facilities based on quality of care data developed and
compiled by the plan or insurer, to meet all of the
following requirements:
A. The information provided must be based on
nationally recognized evidence-based or consensus
based clinical recommendations or guidelines.
Requires the plan or insurer to use measures endorsed
by the National Quality Forum, or other entities
whose work in the area of quality performance is
generally accepted by the health care industry.
B. The plan or insurer must utilize appropriate risk
adjustment factors to account for different
characteristics of the population, as specified.
C. The data used for the cost profile or quality
rating must be updated at appropriate intervals, but
no less than annually.
D. The health plan or insurer must link quality
measurements and cost range of procedures for
comparison purposes, when appropriate.
7. Requires health plans and insures, who provide
subscribers and enrollees with quality measurements of
facilities based on quality of care data developed and
compiled by the plan or insurer, to provide the
following to the affected facility:
A. A minimum 45 days written notice to review the
information.
B. The criteria used to develop and evaluate quality
measurements, and reasonable access to these
criteria, which must be sufficiently detailed and
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reasonably understandable to allow the facility to
verify the data against its own records.
C. An explanation of the facility's right to correct
errors and seek review of the data used to measure
the quality of services provided at the facility.
D. A reasonable, prompt, and transparent appeals
process. Specifies that, if a facility makes an
appeal prior to the expiration of the 45-day time
period, the health plan or insurer shall make no
changes to its current information about the facility
until the appeal is completed.
8. Requires a health plan or insurer that provides such
cost or quality information to also disclose to its
subscribers and enrollees the following:
A. Where the facility's quality measurements can be
found.
B. A disclaimer that the facility's quality
measurement provided is only a guide to choosing a
facility, that enrollees or subscribers should confer
with their existing facility before making decisions,
and that these measures contain an element of error
and should not be the sole basis for selecting a
facility.
C. Information explaining the facility's quality
measurement process, including the basis upon which
quality is measured and any limitations of the data
used.
D. Reasonable details on the factors and criteria
used to measure quality, including whether severity
cost adjustments have been utilized.
E. Information on how an enrollee or subscriber may
register a complaint or provide feedback about the
quality measurement system.
9. Makes any contractual provision that is inconsistent
with this bill void and unenforceable.
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10. Defines "licensed hospital," consistent with existing
law, as an institution, place, building, or agency that
maintains and operates organized facilities for one or
more persons for the diagnosis, care, and treatment of
human illnesses to which persons may be admitted for
overnight stay, including any institution classified
under regulations issued by the State Department of
Health Services (now the Department of Public Health) as
a general or specialized hospital, as a maternity
hospital, or as a tuberculosis hospital, but does not
include a sanitarium, rest home, a nursing or
convalescent home, a maternity home, or an institution
for treating alcoholics.
11. Defines "licensed health care facility" as any
institution or health facility, other than long-term
health care facility as defined in existing law,
licensed by the Department of Public Health to deliver
or furnish health care services.
12. Defines "health care facility" as a licensed hospital
or any other licensed health care facility owned by a
licensed hospital.
13. Prohibits specified fines and penalties, established
in existing law, from applying to the provisions in this
bill.
Background
Price transparency encourages consumers and their
representatives to use price and quality information in
their health care decisions. Governments, employers, and
insurers are increasingly interested in price transparency,
in an effort to improve outcomes and slow the rate of
health care expenditures. The concept behind price
transparency is to make comparative information on the
prices charged by health care providers for specific
services publicly available. The intent is to encourage
consumers, and others who make decisions on their behalf
(e.g., employers, health plans, referring practitioners),
to consider price alongside quality in deciding among
health care providers and services, ultimately to foster a
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more value-driven health care delivery system.
According to a 2007 National Quality Forum report, price
transparency is not simply "pulling back the curtain" on
health care industry financial data, much of which might
not be useful for the typical consumer. To make price
information "actionable," it needs to be not only accurate
and reliable, but also specifically tailored to the
perspectives and needs of a particular audience.
The report points out that "relevant" information might be
different for each audience. Their different definitions
of "price" might include the following:
? Retail Prices - list prices for services that are
charged by providers to patients who are not covered
by insurance or otherwise eligible for discounts.
? Negotiated Prices - the price a provider agrees to
charge patients covered by a specific health plan. In
general, health plans and insurers with greater
purchasing power have greater leverage to negotiate
discounts.
? Patient out-of-pocket payments (i.e., coinsurance,
deductibles, and exclusions) - the share the patient
is responsible for paying. This is the "price tag" of
most interest to patients and their families.
Health plans and insurers, under current law, are allowed
to establish economic profiles of providers and provider
groups. Efforts are underway nationally and in California
to also establish quality rating systems of individual
providers and provider groups.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/2/10)
Aetna (source)
100 Black Men of Los Angeles, Inc.
America's Health Insurance Plans
Association of California Life & Health Insurance Companies
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Blue Shield of California
California Association of Health Plans
California Association of Health Underwriters
California Grocers Association
California Retailers Association
Safeway
OPPOSITION : (Verified 8/2/10)
California Hospital Association
Sharp HealthCare
ARGUMENTS IN SUPPORT : Aetna states that the cost of
health care continues to grow at a rate faster than both
general inflation and wages, making health insurance
increasingly difficult for individuals to afford and for
employers to offer in the workplace. According to Aetna,
the development and disclosure of health care quality and
cost measurements gives consumers the health care
information they need to seek out hospitals and other
health care providers with a proven track record for high
quality care and efficiency. According to the America's
Health Insurance Plans, this bill presents a valuable
opportunity for California consumers to gain a greater
understanding of the quality and costs of health care,
while also creating a transparent, fair and systematic
standard for tracking health care quality data. The
California Association of Health Plans concurs, stating
that price and quality are two important factors that
patients should consider when purchasing health care
coverage and choosing where to receive health care
services. The California Association of Health
Underwriters also writes that this is an important measure
to support increasing transparency for health care costs.
Blue Shield of California states that consumers routinely
receive quality and cost information on the vast majority
of goods and services they purchase, and that health care
services should be no different. Blue Shield also points
out that hospitals represent one of the biggest cost
drivers in the system, and cites a recent Sacramento Bee
article that found that Sutter Medical Center received $420
million in payments for medical services from health plans
in 2008-09 - 127 percent more than it spent to provide
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those services.
The California Retailers Association and Safeway state
that, if this bill is not passed, consumers and employers
risk losing access both to cost information and to provider
performance measurements, at a time when cost efficiency
and quality improvement are of paramount importance to
improving the health care system. The California Grocers
Association concurs and further points out that it is
important to ensure that consumers have all information
available to make informed purchasing decisions regarding
their health care.
ARGUMENTS IN OPPOSITION : The California Hospital
Association (CHA) opposes this bill on the basis that the
bill allows public displays of confidential contract
information, without any protections to ensure that
information is meaningful, accurate and reliable.
Moreover, CHA believes that cost and quality information
should be required to be linked so that the information is
useful and "actionable" for consumers. CHA believes that
public disclosure of confidential information related to
negotiated contract rates could hurt competition, raising
issues of antitrust. CHA also asserts that hospitals
report that health plans frequently post false information
on their website regarding hospital costs and quality. If
hospitals are prohibited from addressing this common
problem contractually, insurers should be required to
provide hospitals the opportunity to validate both cost and
quality information with an appeals process to make
corrections and settle disputes over the data.
Sharp HealthCare writes in opposition, stating that
insurers should not be allowed to misrepresent that a
hospital is "high cost" when costs are higher because that
hospital treats the sickest and neediest patients. Some
hospitals, such as academic teaching hospitals, may see a
larger number of higher acuity cases, compared to other
facilities. Insurers should normalize cost data to
account for such differences in severity and complexity of
cases in order to achieve "apples-to-apples" comparisons.
Sharp HealthCare also points out that the bill, as
currently written, could exclude services reimbursed via
hospital capitation from its analysis. Such exclusion of
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services misrepresents the overall and true cost to the
payer, by eliminating many of the lower cost cases, and
overstating the hospital's overall level of reimbursement.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Block,
Blumenfield, Bradford, Brownley, Buchanan, Charles
Calderon, Conway, Cook, Coto, DeVore, Eng, Evans, Feuer,
Fletcher, Fong, Fuentes, Fuller, Gaines, Galgiani,
Garrick, Gilmore, Hagman, Harkey, Hayashi, Hernandez,
Hill, Huber, Huffman, Jones, Knight, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, Norby, V. Manuel Perez, Portantino,
Ruskin, Saldana, Skinner, Solorio, Swanson, Torlakson,
Torres, Torrico, Tran, Villines, Yamada, John A. Perez
NO VOTE RECORDED: Bass, Bill Berryhill, Tom Berryhill,
Blakeslee, Caballero, Carter, Chesbro, Davis, De La
Torre, De Leon, Emmerson, Furutani, Hall, Jeffries,
Salas, Silva, Smyth, Audra Strickland
CTW:nl 8/2/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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